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Taxes on online purchases? It could happen

Jeremy AlfordCapitol Correspondent

Published: Monday, February 18, 2013 at 7:55 a.m.

Last Modified: Monday, February 18, 2013 at 7:55 a.m.

BATON ROUGE — Out-of-state retailers that sell online goods and services to consumers in Houma, Thibodaux and all other Louisiana communities would have to start collecting and then paying sales taxes to local governments and the state under legislation pending before Congress.

Companies that retail digitally and have a presence in Louisiana, like a storefront or shipping facility, already remit local and state sales taxes.

But those that operate remotely get off the hook.

The proposed Marketplace Fairness Act, however, has a catch: the states would have a choice whether to force out-of-state retailers to comply; it is not a mandate.

The act would also exempt small businesses that do less than $1 million in annual domestic sales.

In addition to targeting e-commence, the bill would apply to catalog sales as well.

U.S. Sen. Mary Landrieu, chair of the Senate Committee on Small Business and Entrepreneurship and a Democrat from New Orleans, joined 53 other members of Congress in introducing the act last week.

She is the only lawmaker from Louisiana on the co-sponsor list.

Landrieu said the bill would help level the playing field between brick-and-mortar retailers and online businesses.

“Small retailers in Louisiana and across the nation are being put at a disadvantage against large, online businesses because of the nature of our tax code,” Landrieu said. “This legislation is simply about fairness and leveling the playing field for all our businesses.”

Officials with Gov. Bobby Jindal's administration said they would track the federal legislation; the governor proposes eliminating individual and corporate state sales taxes in exchange for an increase in the state sales tax, now at 4 percent.

Should Congress pass some version of the Marketplace Fairness Act, it could help Jindal keep his plan revenue neutral, meaning for every tax dollar eliminated another is revealed.

The National Conference of State Legislatures estimates $800 million of sales tax money is lost via Internet sales.

Another study by the University of Tennessee found that Louisiana probably lost out on closer to $440 million in online sales taxes in 2012

The National Taxpayers Union, which is based in Washington D.C., and claims 362,000 members nationwide, is opposed to the Marketplace Fairness Act. The union advocates for less government and smaller taxes.

NTU Executive Vice President Pete Sepp said the proposed legislation reads like a “love letter to overzealous state revenue collectors” and does nothing to address tax fairness.

Sepp said its passage would “tilt the commercial playing field in favor of big-box stores, and upend the constitutionally based doctrine of physical presence that has shielded sellers and buyers from out-of-state tax collectors reaching into their pockets.”

Others argue that the legislation would complicate an already complex task, since there are nearly 10,000 different taxing jurisdictions nationwide.

The bill would overturn a 1992 U.S. Supreme Court decision that found states cannot reach beyond their borders and require out-of-state internet vendors to collect the sales tax owed by state residents and businesses.

Sepp said even if a state decides not to opt in, he is concerned that tax administrators might still end up with increased powers and new taxing abilities.

“Lawmakers who want to be true to their taxpaying constituents should avoid rushing into this legislation and instead call for hearings that can finally explore more rational alternatives,” he added.

The Marketplace Fairness Act has a long list of supporters, some local, like the Louisiana Retailers Association and Louisiana Veterinary Medical Association.

There are more than 200 corporate backers of the plan, too, including Amazon.com, Petco Animal Supplies and Wendy's.

In the Senate, Sens. Mike Enzi, a Wyoming Republican, and Dick Durbin, an Illinois Democrat, are chief sponsors.

On the House side, the chief sponsors are Reps. Steve Womack, an Arkansas Republican, and Jackie Speier, a California Democrat.

<p>BATON ROUGE — Out-of-state retailers that sell online goods and services to consumers in Houma, Thibodaux and all other Louisiana communities would have to start collecting and then paying sales taxes to local governments and the state under legislation pending before Congress. </p><p>Companies that retail digitally and have a presence in Louisiana, like a storefront or shipping facility, already remit local and state sales taxes. </p><p>But those that operate remotely get off the hook. </p><p>The proposed Marketplace Fairness Act, however, has a catch: the states would have a choice whether to force out-of-state retailers to comply; it is not a mandate. </p><p>The act would also exempt small businesses that do less than $1 million in annual domestic sales. </p><p>In addition to targeting e-commence, the bill would apply to catalog sales as well. </p><p>U.S. Sen. Mary Landrieu, chair of the Senate Committee on Small Business and Entrepreneurship and a Democrat from New Orleans, joined 53 other members of Congress in introducing the act last week. </p><p>She is the only lawmaker from Louisiana on the co-sponsor list. </p><p>Landrieu said the bill would help level the playing field between brick-and-mortar retailers and online businesses. </p><p>“Small retailers in Louisiana and across the nation are being put at a disadvantage against large, online businesses because of the nature of our tax code,” Landrieu said. “This legislation is simply about fairness and leveling the playing field for all our businesses.”</p><p>Officials with Gov. Bobby Jindal's administration said they would track the federal legislation; the governor proposes eliminating individual and corporate state sales taxes in exchange for an increase in the state sales tax, now at 4 percent. </p><p>Should Congress pass some version of the Marketplace Fairness Act, it could help Jindal keep his plan revenue neutral, meaning for every tax dollar eliminated another is revealed.</p><p>The National Conference of State Legislatures estimates $800 million of sales tax money is lost via Internet sales.</p><p>Another study by the University of Tennessee found that Louisiana probably lost out on closer to $440 million in online sales taxes in 2012</p><p>The National Taxpayers Union, which is based in Washington D.C., and claims 362,000 members nationwide, is opposed to the Marketplace Fairness Act. The union advocates for less government and smaller taxes.</p><p>NTU Executive Vice President Pete Sepp said the proposed legislation reads like a “love letter to overzealous state revenue collectors” and does nothing to address tax fairness. </p><p>Sepp said its passage would “tilt the commercial playing field in favor of big-box stores, and upend the constitutionally based doctrine of physical presence that has shielded sellers and buyers from out-of-state tax collectors reaching into their pockets.”</p><p>Others argue that the legislation would complicate an already complex task, since there are nearly 10,000 different taxing jurisdictions nationwide. </p><p>The bill would overturn a 1992 U.S. Supreme Court decision that found states cannot reach beyond their borders and require out-of-state internet vendors to collect the sales tax owed by state residents and businesses. </p><p>Sepp said even if a state decides not to opt in, he is concerned that tax administrators might still end up with increased powers and new taxing abilities. </p><p>“Lawmakers who want to be true to their taxpaying constituents should avoid rushing into this legislation and instead call for hearings that can finally explore more rational alternatives,” he added.</p><p>The Marketplace Fairness Act has a long list of supporters, some local, like the Louisiana Retailers Association and Louisiana Veterinary Medical Association.</p><p>There are more than 200 corporate backers of the plan, too, including Amazon.com, Petco Animal Supplies and Wendy's.</p><p>In the Senate, Sens. Mike Enzi, a Wyoming Republican, and Dick Durbin, an Illinois Democrat, are chief sponsors. </p><p>On the House side, the chief sponsors are Reps. Steve Womack, an Arkansas Republican, and Jackie Speier, a California Democrat.</p><p>Jeremy Alford can be reached at jeremy@jeremyalford.com.</p>